Oil & Natural Gas Corp. (Mumbai: ONGC), India's largest state-controlled energy driller, could lose its bid for $5 billion in Canadian assets controlled by ConocoPhillips Co. (NYSE: COP) due to ONGC's investments in Iran, a new risk as the company tries to accelerate its foreign investments, according to the Times of India.

Dehradun, India-based ONGC's Videsh Ltd. unit, which handles international investments, was on the verge of buying Houston-based ConocoPhillips' oil sands assets with a production capacity of 12,000 barrels per day. But the deal could be blocked if the U.S. passes sanctions against firms with over $20 million in holdings in Iran's energy sector. ONGC Videsh has allocated $88 million into gas fields in the Iranian Persian Gulf, according to the Times of India, as well as $1.5 billion in Myanmar, $270 million in Syria and $650 million in Sudan.

ONGC Videsh's ties to countries accused of human rights abuses could further jeopardize its aggressive expansion plan. "We find it difficult to close energy deals in the U.S. because of our investments in countries that have sanctions imposed by the U.S.," ONGC chairman Sudhir Vasudeva told the Times of India.

The company said in its new annual report that it will need to invest $20 billion in foreign assets to hit its goal of increasing oil production sevenfold by 2030. ONGC Videsh has also recently signed deals to partner with China National Petroleum Corp. and Colombia government-controlled Ecopetrol. The Wall Street Journal reported in June that ONGC was also contemplating an initial public offering of Videsh to quicken its investment activity.

In August, India's Comptroller and Auditor General criticized ONGC in a report for failing to fully pursue new investments and monetizing them. "ONGC did not place the desired emphasis on its core exploration activity," the report said. "ONGC was also tardy in monetizing its discoveries which contributed to low production."

The auditor called for a review of the company's Reserve Replacement Ratio (RRR), a measure of new oil holdings added to the company's stockpile compared to its total production.

ONGC was down 0.28 percent to 271.65 Indian rupees at Tuesday's close. ConocoPhillips fell 49 cents to $56.30 during Tuesday morning trading.